Motley Fool Money - "Top Gun: Maverick" Wins the Weekend and Strengthens Studio Businesses

Episode Date: May 31, 2022

It wasn't just Tom Cruise's biggest opening weekend ever, it was the biggest Memorial Day opening weekend for a U.S. movie. (0:25) Bill Mann discusses: - How "Top Gun: Maverick" is the right movie at the right time - Ripple effects for studios, streamers, and more - Unilever's stock popping 9% by adding activist investor Nelson Peltz to the board - Why he's a fan of Peltz and his form of shareholder activism (13:00) Robert Brokamp talks with Dan Caplinger about how investors can fight inflation and one common myth about how to hedge against rising prices. Stocks discussed: PARA, DIS, AMC, UL, PG Host: Chris Hill Guests: Bill Mann, Robert "Bro" Brokamp, Dan Caplinger Producer: Ricky Mulvey Engineers: Dan Boyd, Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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Details next. Motley Fool Money starts now. I'm Chris Hillen, joining me today, Monty Fool's senior analyst Bill Mann. Thanks for being here. My voice is a little hoarse today, Chris. I went to go see Top Gun Maverick last night, so I've got lots to talk about. And no voice to do it. What a perfect combination.

There was crying. I'm not going to lie. There was crying in the theater. Not me, not me, but embarrassed crime. I want you to spoil anything because I think I'm going to be seeing it on Thursday. But we're actually going to start with Top Gun Maverick. The business ripple effects of this film are what I want to talk about. Now, not adjusted for inflation, 156 million at the box office. It's the biggest Memorial Day weekend opening ever. It's the biggest, the biggest, opening weekend for Tom Cruise for any of his films ever, so I'm glad something finally good happened for him. There is a lot of talk today about movie theater stocks, in particular AMC, which sure, if you're

an AMC shareholder, you wanted this thing to be a hit. But I don't know. Am I wrong in thinking the potential ripple effects go beyond movie theater stocks? I think the number that struck me, Bill, beyond the dollar figure, which is impressive. The number that struck me is 4,700 because that's how many theaters this movie opened in. And this is an opening weekend that you would see pre-pandemic. I mean, more so than anything else in the entertainment industry that I've seen in the last couple of years, this to me was a signal of, oh, wait, people actually will go into movie theaters if you give them a reason to.

Yep. I think that's absolutely the case. It was estimated because the numbers aren't as clean going around the world, but it was 280 million worldwide on its open. And that's impressive even more so because it didn't open in China or in Russia. So this was a huge open. And it was also, it was a sign of a couple things to me. And I really don't want to talk about AMC, but it is a sign that theaters are back, that we are at a point in which people are comfortable going to the movie theaters,

and they did so in huge, huge numbers. It also, to me, not to become film critic, because I know you don't want that. And I know you don't want me to spoil the ending, but it's a top gun movie, so the ending really doesn't matter. It's the journey. But this was the least cynical movie that I've seen in a really long time. It was un-cynical in the same way that Ted Lassau was uncynical and came at a perfect time. So I wonder if one of the implications are that people, and by people, I mean movie houses, will pay attention to the fact that this is something people want.

want. And when that happens, you tend to do see a bump. I also wonder how many of the people who went to see this film over the last four days. For them, it was their first time back in a movie theater before the pandemic, because we've seen this with travel, we've seen this in restaurants, and of course, we're going to see it in movie theaters as well, that maybe there's a little trepidation going in. But if it's your first time, you know, we're going since before the pandemic and you have a good experience, it puts you in a level of relief where you think, oh, okay, it took this blockbuster film to get me in the theater, but it's not going to take a blockbuster on this level to get me back in the theater

and back out in the world. It's so funny that you say that, and I hadn't really thought about it in these terms until you started going down this path. I think this was the perfect movie to really launch a reopening for the theaters because it is that type of a positive experience. So I went with four other people yesterday and three of them had not been back into a movie theater since the beginning of the pandemic. And this was the event that brought them there. It was something that was 100% going to feel good. Like, again, not giving away anything.

They don't even name who the enemy is in this movie. They're not going after anyone. It's just there are mythical bad guys. You don't have to name them. There's just nothing about this movie that is, you know, where they're like trying to outsmart the audience or trying to be ironic. It's just straightforward action fun.

And you're exactly right. That's something people have craved and will go back for and did it to the tune. of more than 100 million in box office revenues. I heard it said this morning, someone was writing and that obviously the enemy that they were talking about that they didn't name was Wakanda. I think a bold choice really would have been Switzerland. Just to mix it up.

Great opening to the summer box office season, and we'll see where it goes from here, because certainly there are other big-ticket films coming on. One more thing on this topic before we move on. I wonder what this does for businesses like Disney that have studios, but have a streaming service. If it makes their life easier or harder in terms of decisions of, well, what are we putting to the streaming service? What are the things that we're getting? Because I would think it would, this is fodder.

for the people inside Disney, Paramount, which is the, you know, they have their own streaming service, and they're the studio behind this film. I'm assuming this lens fodder for people who are saying, no, we really do need to continue on a tent pole strategy, get the revenue at the box office, and then move things to the streaming service. 100%. Absolutely. That's the plan.

And you could even see it with this movie. in that they were setting it up to move it into a franchise. You can absolutely see it. And again, it's harmless. You're perfectly allowing to have that happen to you, but you know at the end of this movie what the next movie is and who the stars are. So absolutely, the streaming companies, and Paramount in this case, it has their own streaming service, are setting this up so that movies, maybe even video games and streaming services complement and reinforce each other. Because this was an opening this last weekend, also of Obi-1 Canobi for Disney. I mean, this is absolutely positively a reinforcement of that model.

We're going to move to a very different industry, which is the consumer products industry. Unilever has over 400 global brands, and the news today is that Unilever, is that Unilever is getting a new board member, activist investor Nelson Peltz, who runs Triand Fund Management, which owns 1.5% of Unilever. And shares of Unilever are up 9% on this news. And I don't mean any disrespect to Mr. Peltz, but I'm wondering, what do some investors think he is going to do to improve Unilever's business that warrants this kind of optimism? Ideally, it's beam Hellman's mayonnaise into a wall. Or something with Ben and Jerry's.

I'm not sure. Something with Ben and Jerry's. So it was a really interesting transaction. So Nelson Peltz and Tri-R-Tri-Anne, excuse me, came in and took a marginally hostile, but an activist position at Procter & Gamble in 2017, and they really made suggestions. I really, I really respect Nelson Peltz because he's a, He's not an activist who comes in and says, okay, we're going to financially re-engineer this company. He has actual structural suggestions, and they really, really worked at Procter and Gamble,

which is a pretty good proxy for Unilever. I mean, they own. I would argue it's the best proxy for Unilever. Yeah. Yeah. So, yes, I mean, I guess the only difference being is that Unilever is a UK domiciled company as opposed to Procter & Gamble being a US one. So some of the corporate realities of the business are different.

But Procter & Gamble is up more than 90% since 2019. And I don't know if you know this, but there was a really big supply chain issue or three in between those times. So Procter & Gamble is running on all cylinders. Now, I wouldn't say it's really overstating the point. to suggest that Nelson Peltz came in and single-handedly turned around Procter & Gamble. But just like Procter & Gamble was at that time, it seems like Unilever's management is willing to listen, and he is pushing them in the right direction.

You're a fan of Peltz. I am. I am. I don't think. So so many of these corporate activists really come in and they do kind of a financial re-engineering. Like, okay, let's take all of your properties and then you sell them and then rent them back. Like, that's no kind of restructuring. That's like financial engineering. He really came in. So with Procter & Gamble, for example, he said, basically you have an entire mess of brands

that you are trying to run centrally. Why don't you organize them into groups and cohorts and have them run almost like separate companies from each other so that you might even be in a situation. where two P&G brands are competing with each other for shelf space or things like that. And it helps. It really helped to revitalize not just some of the brands. And they figured out some things that they didn't want to own anymore. But that's happening with Unilever again. And Unilever is also kind of at the beginning of trying to figure out how to change what has been a fairly sleepy corporate culture. And to me, to me,

in some ways, Chris, having someone like Peltz come in gives management a little bit of cover to make hard decisions. They're like, well, our hands are tied. This guy is coming in and we need to pay attention. So in some cases, and I think that Peltz is amongst the best, having an activist investor coming in really helps a management team. Bill, man. Great talking you. Thanks so much for being here. Hey, thanks, Chris. Enjoy the movie. Last week, certified financial planner Robert Brokamp talked with Dan Kaplanar about a couple of ways investors can fight inflation. Today, Broke continues that conversation and dispels one common myth about how to hedge against rising prices. The type of stock that has done well during inflationary periods in the past and paid

and above average dividend is a real estate investment trust or reet. Now, reits have not done particularly well this year, but history suggests that REITs should still play a part in your portfolio. Plus, real estate investing in general can be a good inflation hedge, and we discussed why in our March 29th episode, but part of the reason is because tangible stuff in general can do well when prices spike, which brings us to our third inflation fighter, at least potentially, and that is commodities. Dan, tell us a little bit about putting commodities in your portfolio to fight inflation. So yeah, bro, commodities are something a lot of people think about when we're talking about inflation because commodities are the things that we're paying higher

prices for. And so in an inflationary environment, almost by definition, commodities seem like the thing to buy because their prices are going up. And sure enough, when you look at some commodity-based investments, like the InvescoDB commodity tracking ETF, it's up significantly this year, a 35% rise year-to-date here in 2020. that follows a 41% increase in 2021. And it's pretty easy to understand why, anecdotally, we've heard all of the stories and we're seeing the pain ourselves, whether it's paying more at the pump for gasoline,

whether it is paying higher prices for the food that we buy at grocery stores and eating out at restaurants, whether it is sky-high airfares as we try to travel for the first time in several years. Consumers are really seeing it. And it is something that, you know, if you can kind of cash in and say, okay, well, how can I buy the things that go into making these higher priced elements possible, how can I buy, you know, how can I get exposure to rising crop prices, rising energy prices, rising metals prices for the, you know, industrial needs that we have, for the steel that goes into cars and aircraft, for

aluminum, for nickel, for even the lithium that goes into electric vehicles, it's always a question, okay, well, what's the, you know, how can you cash in on that? The issue with commodity ETFs is that they, while they do a pretty good job in the short run of matching movements in the commodity markets, the long-term trajectory that they've taken is far from great. When you look over, you know, we mentioned that one commodity ETF and it's up over the past year, year and a half or so, but it has not done particularly well over the past decade. It's been kind of not very good at all, actually. And again, you can kind of see why if you, you know, turn back the clock to the early 20 teens, you had record high gold and silver prices, you had oil prices pushing

up well into the triple digits. Then in the late 20 teens, you had a long period of cyclical decline. You saw those precious metals prices fall. You saw energy prices fall. We had our lowest gasoline prices in a long, long time in the late 20 teens. And then into 2020, we had the big energy disruption at the beginning of the COVID-19 pandemic. And at that point, you know, energy prices just fell all the way through the floor. And so that is one reason, you know, commodities, you see great volatility, and they look like great investments during up cycles. But as long-term investments, you inevitably have to endure long downward cycles as well.

The other challenge with commodities is that investing in them is difficult. Most of us don't have a silo to put a bunch of weed in. Even if we did, it wouldn't last more than a few months. Most of us don't have a bank vault to put a whole bunch of gold in, don't have mining capacity to dig up our own oil in our backyards or anything like that. And so we usually have to turn these investments that you can buy that are tied to commodities are usually based not on actual commodities, but on futures contracts. And when you do that, you open yourself up into,

to sort of the vagaries and idiosyncrasies of the futures markets. I won't get into the big details because it's a complicated topic, but just to give you a sense, there was a period of time in April 2020 when futures contracts on crude oil were negative. It meant that people in the futures markets were actually paying people to take oil off of their hands. Now, I don't know about you,

but I did see those oil, those gas prices fall, but nobody was ever paying me to put gasoline in my car. So that kind of gives you a sense of just how uprooted futures markets sometimes get. And while conditions aren't usually that extreme, the overall trend for a lot of commodities markets makes ETFs that track them underperform the long-term price trends of the actual commodity. So before you go there, just be careful with it. I'll just throw in one other thing. You know, when you're talking about things like gold, gold is probably seen as the ultimate inflation hedge. You know, we looked up a study from Duke University.

Some researchers there did some study and concluded that gold does infly. Gold prices do, in fact, kind of match up with inflationary trends. as long as you have a century or more to invest. Now, you know, that's a long time. We're big on long time horizons here at the Motley Fool, but a century or more is longer than even really the most optimistic of us out there. And so I think that there's probably better ways to protect against inflation than just having a big block of gold.

I will say I've got a couple of gold. coins at home, but they're more for the coin value than anything else. So we'll just leave it there, but commodities maybe make sense to a limited extent, but I like to get my commodity exposure, not through the actual commodities, but rather through the stocks that actually generate them. So oil and gas companies for exposure to crude oil, mining companies for exposure to gold and silver kind of food products, companies for crops exposure and that kind of thing. The fact that these operating businesses make profits, often pay dividends, it gives them an advantage over

just directly investing in the commodities markets, in my view. Okay, let's move on to inflation fighter number four. And it's your human capital, which is basically your ability to earn a growing and safe paycheck. I might wonder why we're talking about this, because we were talking about portfolios. Well, your portfolio is funded by your paycheck. In order to invest money, you first have to earn money. When Warren Buffett was asked how to deal with rising inflation at the Berkshire Hathaway meeting this year, he said, the best thing you can do is to be exceptionally good at something. And later on, he said, whatever abilities you have can't be taken away from you. They can't actually be inflated away from you. So what we're seeing now in these

days of higher prices, we are seeing wage growth. It's not keeping up with inflation for everyone, but it is still going up, and it's going up more than we've seen in many years, in some cases, decades. Plus, for some professions and higher performers, you know, if you're just doing really well at your job, compensation is outpacing inflation. In fact, over the long term for professionals, compensation rises about 2 to 4 percent above inflation over someone's career. So, what do you do? Well, take some time to think about your job performance and your career path and determine maybe what you can do to boost your income. And as a reminder, in our April 26th episode, we discussed how to ask for a raise. And final thought on this topic, when prices go up,

the cost of your financial goals go up. Add that to portfolios that are now worth less. And many people might now be further behind and saving for retirement or whatever goals you have. The solution, of course, is to get more money into your 401k, your IRA, your brokerage account. And that's a lot easier to do if your income is growing. So those are a few ways to fight inflation. Dan, you have any final thoughts on inflation here for us? I do. You know, the sentiment on inflation has really just gone the full spectrum in the past couple of years.

At first, people saw inflation as being purely transitory, nothing to worry about whatsoever. Now we've gone into almost full-blown panic mode with everybody harking back to the 1970s and 1980s and thinking that we're going to have a full-blown stagflationary environment. in all likelihood, the real answer is somewhere in between. It doesn't mean you shouldn't be worried about it. It doesn't mean you shouldn't take some steps to deal with it. But don't make it the focus of your investing strategy. Don't let it take you away from the long-term strategy that has worked so well for so long. It will continue to work. Just consider these ideas as you position yourself in this inflationary environment.

Yeah, and I'll just add, there's really going to be any magic silver bullet to this. Like investing in general, some things will work better than others. Some will work just as well as they did in the past. Some will not. So the wise thing to do is just to take a multi-pronged approach to making sure that your portfolio keeps up with rising prices. And with that, Dan, thanks for joining us. Thanks.

I really like to be in here. Thanks, bro. As always, people on the program may have interest in the stock, talk about and the Motley Fool may have formal recommendations for or against, so don't buy ourselves stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.